Earlier this week, I used to be wanting on the prime 10 constituents of the UK’s FTSE 100 index. And one factor jumped out at me – RELX (LSE: REL) is at the moment the sixth-largest enterprise within the index.

At current, this under-the-radar firm has a market cap of £77bn. Which means it’s larger than BP, British American Tobacco, GSK, Barclays and plenty of different well-known corporations.

So, what does this firm do? And extra importantly, is it price contemplating for a portfolio at this time?

An information powerhouse

RELX is a supplier of information-based analytics and resolution instruments for skilled and enterprise clients. Its purpose is to assist clients make higher choices, get higher outcomes, and be extra productive.

As we speak, the agency serves clients in 4 principal areas – danger, scientific, technical & medical, authorized, and exhibitions. Using greater than 36,000 folks worldwide, it operates in round 180 international locations.

In recent times, RELX’s share price has risen considerably. And it’s simple to see why.

Within the coming years, companies are more and more going to show to knowledge and analytics to spice up productiveness. And RELX – which has not too long ago been incorporating synthetic intelligence (AI) into its options – might be a significant beneficiary of this pattern.

It’s price noting that its databases at the moment home over 40 petabytes of knowledge. If knowledge is the brand new oil as they are saying it’s, this firm is akin to a huge oil nicely.

Price contemplating?

Ought to buyers think about shopping for the inventory at this time?

Nicely, there’s a lot to love about RELX from an funding perspective.

For starters, the corporate is anticipated to generate stable development within the years forward on the again of the information/AI growth. For 2025, income and earnings per share are projected to extend 7.4% and 11.1%, respectively (that’s the next stage of development than plenty of FTSE 100 corporations are producing).

I’ll level out that portfolio supervisor Nick Prepare – who holds the inventory in his UK fairness fund – mentioned final yr that he believes RELX has “transformative profit potential ahead.” Clearly, he’s bullish right here.

Secondly, the corporate may be very worthwhile. Between 2019 and 2023, return on capital employed (ROCE) averaged 23%. This is a crucial metric. As a result of historical past exhibits that corporations with a excessive ROCE are usually good long-term investments.

There’s additionally a rising dividend. This yr, the payout is forecast to develop about 9%. That mentioned, the yield is simply about 1.7%. So, it’s not a inventory for giant earnings.

Moreover, the inventory has an ideal long-term observe file. Over the past 5 years, it has climbed about 100%. Over the past 10 years, it’s up about 250%. There usually are not many Footsie shares with observe data like that.

On the draw back, the valuation is at the moment fairly excessive. With analysts anticipating earnings per share of £1.33 this yr, the forward-looking price-to-earnings (P/E) ratio is about 31.

That’s not loopy for an information firm. But it surely doesn’t go away a lot room for error (resembling a slowdown in enterprise development or an surprising drop in income).

One other danger right here is sentiment in direction of tech/AI shares. If this was to deteriorate, we may see some profit-taking.

Given the valuation, I feel it might be sensible to think about ready for a pullback for anybody considering shopping for this inventory. They may not have to attend lengthy – full-year earnings are tomorrow (13 February) and these may doubtlessly create some volatility.